Roy Malone v. Scott Probasco
Unreported (2003)
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Rule of Law:
The parol evidence rule bars the admission of extrinsic oral evidence that directly contradicts the clear and unambiguous terms of a fully integrated written agreement, particularly when the agreement contains an explicit disclaimer of the very legal relationship the oral evidence purports to establish.
Facts:
- In the 1980s, Roy Michael Malone, Sr. began acquiring properties in a specific area of Chattanooga, anticipating future development by the University of Tennessee at Chattanooga (UTC).
- In 1988, to fund further purchases, Malone was introduced to Scott L. Probasco, Jr., a bank chairman, who began personally lending Malone money to acquire properties in the target area.
- In 1989, an accountant drafted a partnership agreement between the parties at Probasco's request, but this document was never signed.
- In May 1990, Malone and Probasco signed a 'Management Agreement' which designated Malone as 'Manager' and explicitly stated that Malone had no ownership interest and that 'no joint venture, partnership, or other similar arrangement exists' between the parties.
- This agreement stipulated Malone's compensation would be 50% of the net proceeds from the 'ultimate sale or other disposition' of the properties.
- On December 31, 1991, Probasco conveyed the properties to the University of Chattanooga Foundation (UCF), a move Malone opposed, as he wished to hold them for further appreciation.
- On April 22, 1992, Malone and Probasco executed a 'Letter of Agreement' which confirmed the property transfer to UCF, established a new compensation structure for Malone, and stated that it 'replaces all prior understandings of the parties whether oral or in writing.'
Procedural Posture:
- Roy Michael Malone, Sr. (Plaintiff) filed a complaint against Scott L. Probasco, Jr. (Defendant) in the Circuit Court for Hamilton County, the trial court of first instance.
- The complaint alleged, among other things, the existence of a partnership, breach of that partnership, and fraud in the inducement.
- Probasco filed a motion for summary judgment, asking the court to dismiss the case without a full trial.
- The trial court granted Probasco's motion for summary judgment and dismissed Malone's complaint.
- Malone (Plaintiff/Appellant) appealed the trial court's grant of summary judgment to the Court of Appeals of Tennessee.
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Issue:
Does the parol evidence rule bar testimony about an alleged oral partnership agreement when that testimony directly contradicts the clear terms of subsequent written agreements that expressly disclaim the existence of a partnership?
Opinions:
Majority - Houston M. Goddard, P.J.
Yes. The parol evidence rule bars testimony about an alleged oral partnership agreement that directly contradicts the plain terms of the parties' written contracts. The May 1990 Management Agreement, signed by Malone, unambiguously states that no partnership exists. Any oral evidence seeking to prove a partnership is in direct contradiction with this provision and is therefore inadmissible. While an exception to the parol evidence rule exists for collateral agreements, that exception does not permit evidence that varies or contradicts terms plainly expressed in the writing. Furthermore, Malone's claim of promissory fraud fails because he did not provide the necessary evidence to support it. To prove promissory fraud, the plaintiff must show the defendant made a promise with no present intention of keeping it. Malone himself testified that he believed Probasco did intend to keep the alleged promise at the time it was made, which negates an essential element of the claim. The 1992 Letter of Agreement further reinforces the written terms by explicitly stating it supersedes all prior oral and written understandings, making it a fully integrated contract that cannot be altered by prior oral statements.
Analysis:
This case strongly reinforces the application of the parol evidence rule in contract law, emphasizing that courts will uphold the clear and unambiguous terms of a written agreement over conflicting oral claims. It highlights the difficulty of succeeding on a promissory fraud claim, as it requires proof of a lack of present intent to perform at the moment the promise is made, a high evidentiary bar that a plaintiff's own testimony can undermine. The decision serves as a powerful precedent for enforcing integration clauses and explicit disclaimers in contracts, cautioning parties against relying on oral assurances that are not memorialized in their written agreements.
